UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Do tariff cuts cut prices?'
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Nov 11, 2025 Explore the potential cut of US tariffs on Swiss imports from 39% to 15% and its negligible impact on consumer price inflation. Delve into the complex relationship between tariff reductions and actual consumer prices, highlighting historical trends of inflation stickiness. Consider the unpredictable effects if the US Supreme Court rules other tariffs illegal, which could lead to a mixed bag of new tariffs. Plus, insights on UK retail sales, real income trends, and the importance of discerning media narratives in business sentiment surveys.
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Tariff Cut Signals More Than Price Change
- A reported cut from 39% to 15% on Swiss imports would have minimal direct impact on US CPI due to small import share.
- Paul Donovan warns the key effect is signalling and potential evidence of price stickiness when tariffs reverse.
Price Increases Often Stick After Tariffs Fall
- Where past tariff increases were passed to consumers, retailers often kept higher prices even after tariffs fell.
- Donovan highlights this persistence as a sign that tariff reversals may not reduce consumer inflation quickly.
Court Ruling Could Shift Inflation Unevenly
- A Supreme Court ruling voiding many tariffs could replace them with a new regime featuring both lower and higher rates across products.
- Donovan cautions this mix could leave some consumer inflation unaffected and raise inflation elsewhere.